Hidden U.S. Software Billionaire Ragon Surfaces in Boston

Sept. 19 (Bloomberg) -- The push to digitize medical
records in the U.S. has created a new software billionaire who
built his fortune 3,000 miles away from Silicon Valley.

Phillip Ragon, who goes by Terry, is the founder and sole
owner of Cambridge, Massachusetts-based InterSystems Corp., the
biggest provider of database management services in the health-care industry. With 80,000 customers and $385 million in annual
revenue, closely held InterSystems is worth more than $2
billion, according to the Bloomberg Billionaires Index.

“InterSystems provides a very strong integration engine
platform widely used in the health-care market space,” said
Lynne Dunbrack, program director of connected health strategies
at market research company IDC Health Insights, in a phone call
from its Framingham, Massachusetts, headquarters. “Their
customers continually praise them for their development team and
their support staff.”

While Ragon, 62, keeps a lower profile than other database
billionaires, including Larry Ellison, chairman of Redwood City,
California-based Oracle Corp., he has engaged in the kind of
jostling -- feuding with Microsoft Corp., taking private equity
company Blackstone Group LP to court -- that Ellison is known
for. He is also demonstrating some of his peers’ largesse,
pledging $100 million to fight AIDS.

Catherine Marenghi, a spokeswoman for Ragon, said he
declined to comment on his net worth.

Veterans Breakthrough

Ragon is poised to seize on the expanding market for
converting paper medical records into electronic files, Dunbrack
said. Only 18 percent of the nation’s hospitals and 34 percent
of private practitioners have a basic electronic health-record
system, according to a September report by the Washington, D.C.-
based non-profit Institute of Medicine. Funding provided by the
U.S. government, including an electronics records earmark in the
Affordable Care Act, should also encourage hospitals and doctors
to go digital, Dunbrack said.

The growing electronic medical records business led
Ellison’s Oracle to acquire health-care technology firms such as
Phase Forward Inc. and ClearTrial LLC. As those database
companies vie for position, they face an entrenched adversary in
InterSystems.

Armed with a physics degree from the Massachusetts
Institute of Technology, Ragon founded database company
Interpretive Data Services in Brighton, Massachusetts, in 1978,
according to articles of incorporation filed with the
Massachusetts Secretary of State. In the years that followed,
Ragon built applications for local medical organizations, such
as Massachusetts General Hospital. He changed the company’s name
to InterSystems in 1980.

‘In Tears’

In 1994, Ragon acquired the health-care database division
of struggling Digital Equipment Corp., a purchase that almost
doubled annual sales to $33 million. In 2003, the company
created an electronic health-record database for the U.S.
Department of Veterans Affairs, integrating 130 different
platforms being used throughout the VA system.

The result was so successful for the VA that Ragon was
called to testify before a Senate committee researching
electronic health records in 2006.

“I had people come up to me in tears, telling me they
called their family members who were veterans of the Vietnam
War, and they were just in tears because of the unbelievable
improvement that’s occurred,” he told the committee.

A provision in the American Recovery and Reinvestment Act
of 2009 provided $26 billion in financial incentives for using
digital health records. Outpatient physicians, for instance,
could receive as much as $63,000 from Medicaid over five years
if they prove they are using the technology.

Fighting Microsoft

The Affordable Care Act, passed in 2010, provides
additional inducements for doctors and health-care facilities to
use electronic records, and encourages states to create medical
databases. The bill requires all states to establish electronic
health-care exchanges by 2014 to make it easier for consumers to
purchase health insurance.

So far, InterSystems has won contracts to build such
systems in New York, Missouri, Rhode Island and Illinois.

InterSystems’s biggest battle with Redmond, Washington-based Microsoft, the world’s largest software maker, was over
real estate. In 2007, Microsoft signed an agreement to lease
additional space in the 17-story building it shares with
InterSystems on the bank of the Charles River in Cambridge,
Massachusetts.

Ragon sued the landlord, New York-based Blackstone’s Equity
Office Properties unit, claiming his company had the right of
first refusal on the space, and that EOP and Microsoft conspired
to raise rents in the building, according to court documents.
The matter was settled out of court in 2009.

Skyline Wars

When Microsoft secured a zoning waiver to put its lighted
logo at the top of the building’s facade, Ragon formed a
coalition, Save Our Skyline, to lobby the city council to repeal
the amendment. The organization painted Bill Gates’s company as
a villain. “Once Microsoft sets the precedent, how many more
signs will follow?” the group’s website said.

Ragon’s group gathered 7,554 voters, 12 percent of
Cambridge’s electorate, and got the city council to rescind the
permission in 2010. Microsoft later put its logo atop a nearby
office building not subject to zoning restrictions.

Ragon has been active in giving to national politicians. In
2004, he and his wife, Susan, donated $3 million to America
Coming Together, a political action committee backed that year
by George Soros that sought to defeat George W. Bush in the U.S.
presidential election. Since then, the couple has donated almost
$700,000 to Democratic Party candidates, according to
Washington, D.C.-based Center for Responsive Politics.

AIDS Pledge

Donations in this year’s election have been to support
Elizabeth Warren, the Democratic challenger to incumbent
Republican Massachusetts Senator Scott Brown, and American
Bridge 21st Century, a PAC that focuses on fact checking
Republican candidate campaign statements.

Ragon’s biggest charitable gift has been to fight AIDS. In
2009, he pledged $100 million to Massachusetts General Hospital
-- the hospital’s largest gift ever -- to form the Ragon
Institute of MGH, MIT and Harvard. The cross-institution
organization is dedicated to developing an AIDS vaccine.

According to a rare interview Ragon gave to the Boston
Globe in conjunction with the gift, it was a 2007 trip to South
Africa arranged by Bruce Walker, an AIDS researcher who now
heads the institute, that convinced Ragon he could make a
difference.

“You might say back in Newton’s time, you could be a solo
physicist conducting research,” the newspaper quoted Ragon as
saying. “But today, you need projects where large groups of
people come together to focus on advancing the state of
science.”